Public Bill Committee

[Mr David Amess in the Chair]

Clause 54 ordered to stand part of the Bill.

Clause 55  - Right to repeat performance

Stella Creasy: I beg to move amendment 59, in clause 55, page 32, line 19, at end insert—
‘(1A) Where the quality of provision of services has been deemed to be hazardous or so poor as to cause the consumer to reasonably lose confidence in the trader’s ability to provide services which they would wish to purchase, the consumer may refuse a repeat performance and exercise their right to price reduction under section 56.’.

David Amess: With this it will be convenient to discuss amendment 60, in clause 56, page 32, line 43, at end insert—
‘(c) the consumer has exercised their right under section 55(1A).’.

Stella Creasy: May I wish the Committee good morning? I am sure that we will have some interesting debates today as we move on to questions about unfair contract terms. I am conscious that we have a lot of meaty subjects to get on with and a lot of things that we want to progress, so I want to give notice that as much as I enjoy the philosophical conversations that we have with the hon. Member for Braintree, perhaps we will do that at lunchtime, so that we can make progress now. That is a reflection more on me than on him; I want to be clear about that.
Amendment 59 is on a familiar subject that Opposition Members are concerned about. I have tabled the amendment to flag up again our concern that, in some instances, consumers will have had such a bad experience with a trader that to ask them to go through a repeat performance, rather than simply getting their money back, would not be appropriate. We want assurances that there is provision in the Bill so that in circumstances in which trust has broken down to such a great extent, consumers do not have to go back to someone who perhaps has behaved in a way that has put them at risk of personal injury, and certainly has behaved in a way that has made them so concerned that they do not want them back in their house.
Amendment 60 is simply a tidying-up amendment consequential on amendment 59. I do not intend to discuss it further, because we have made the concerns clear, but if the Minister could confirm that the circumstances that I have described have been taken into account in the Bill, that would be welcomed by Opposition Members.

Jennifer Willott: Good morning, Mr Amess; it is nice to welcome you back to the Committee. I hope that the room is slightly warmer this morning than it was on Tuesday morning, when pretty much all of us ended up with our coats on.
As the hon. Member for Walthamstow said, the amendments relate to much the same issues as amendment 57, so I will keep my reply brief. I can only repeat the reassurances that I gave before and stress that we have consulted widely on the remedies and received broad support. The Select Committee on Business, Innovation and Skills looked at the remedies and recommended only minor changes, which we then made. There has also been support from both business and consumer voices. The British Retail Consortium told us that it agreed that our approach would be helpful to the extent that it is practical and realistic. There is general support for it.
As I also said previously, we agree that consumers should be protected from traders who would unnecessarily endanger their personal safety, and that they should not have to allow them back into their homes ever again if they do not feel happy with that. That is clearly the case, and that is why we are writing into statute in clause 54 that the consumer retains their access to common-law remedies as well. That is alongside protection in legislation such as the Health and Safety at Work etc. Act 1974, building regulations and so on, which we discussed on Tuesday. Given those protections and the protection built into clause 54, I hope that the hon. Lady is reassured.

Stella Creasy: I thank the Minister for her answer. I am sure that the implementation group will also be discussing how to ensure that people are aware of that remedy, as well as the right to a price reduction. On that basis, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 55 ordered to stand part of the Bill.

Clause 56  - Right to price reduction

Stella Creasy: I beg to move amendment 62, in clause 56, page 32, line 34, at end insert—
‘(1A) When considering what is an appropriate amount for the purpose of this section, consideration shall be given to reasonable steps that will return the consumer to the position they would be in if the trader had not breached the contract in the first place.’.
This amendment is designed to help us gain from the Government a greater understanding of how they see the right to a price reduction working when it comes to financial services, and how the Bill may fit in with the current guidance from the financial ombudsman about how to determine what is an appropriate remedy when someone has had bad service in relation to financial services. In particular, it is about the concept of restoring someone to the position that they would be in financially had they not had the service that has caused them financial detriment. We have tabled the amendment simply because we would like to get on the record clarity from the Government about how they see the clause applying to financial services.
I think that we all recognise that there are differences in appropriate price reductions. Let us say that someone has paid for some physiotherapy and one of the sessions has not been appropriate. What the price reduction might be in that situation is different from what it might be for someone who has a problem with the mortgage advice or insurance advice that they have paid for. There could be different and severe consequences for someone’s financial situation depending on whether they lose out from a service performed badly once or from a service performed so badly that it has a financial consequence for their family for decades to come. The financial ombudsman has current guidance about returning someone to the financial position they were in prior to the service.
It would be helpful to learn from the Minister whether that is the spirit behind the clause. If the amendment to include that provision is not agreed, how does she envisage consumers securing compensation through a price reduction or the remedy in the legislation, given the guidance from the financial ombudsman? We tabled the amendment in order to gain more information about that issue.

Jennifer Willott: The amendment is intended to clarify how an important remedy in the Bill is to be calculated. The right to have money back is crucial to how we see the Bill operating. Statutory remedies for services are one of the most important changes that we are making in the Bill. Currently there are few statutory remedies if a service is not provided with reasonable care and skill.
We agree that, when a customer is entitled to money back or a discount for a substandard service, the discount should normally reflect the value of the service that the consumer received. That was recommended by the Business, Innovation and Skills Committee as a result of its pre-legislative scrutiny. In response, we have made clear the Government’s intention in the explanatory notes.
That remedy is not the same as the one in the amendment, which seems to direct that the reduction in price should be calculated according to how much it would cost to put the consumer in the position they would have been in had the contract been properly performed. It appears to seek effectively to codify the law on damages, which is not the aim of the clause.
When a service has been really poorly performed, it may cost more to put right than the original cost of the contract. For example, if a builder does not repair a roof properly and there is a leak into the bedroom, it could do significant damage that would cost more to repair than the original price of the contract. Understandably, in those circumstances somebody would want to recover more than the contract price from the trader to cover the cost of putting right the additional damage. That could be done by pursuing a damages claim.
Hon. Members will have noticed that the price reduction can be the full price that the consumer paid, when it is calculated, but that would not always capture all the possible losses arising from a poorly performed service. To recover the additional costs, in the case of the damaged bedroom, the consumer would need to seek damages on top. In consultation, the Government proposed that consumers should continue to pursue the existing contractual remedies under general contract law for losses, other than the cost of completing the service in accordance with the contract, such as consequential damages for personal injury as a result of a negligent service.
As Which? acknowledged in its response, it would be difficult to codify the complex law on damages, and it could have unintended consequences. As mentioned in the previous debate, we have made it clear in the Bill that if a consumer seeks redress under the statutory regime, they are not prevented from obtaining further redress that they may be due under contract law, for example to top up the costs of fixing the faulty service over and above the original contract price. The Bill explicitly covers that in clause 54(6), which says that statutory remedies
“do not prevent the consumer seeking other remedies…instead of or in addition”
to a statutory remedy. So that is laid out in the Bill.

Fiona O'Donnell: Will the Minister tell us whether that would apply to a telecoms provider that gives a contract promising to install a line by a particular date and does not manage to do that? When my constituent tried to claim back the consequential cost of topping up her mobile phone, she was offered only a credit against her account rather than a reimbursement of cash for out-of-pocket expenses.

Jennifer Willott: I will come back to the hon. Lady, as that is quite a complicated question. I am sure I will have an answer for her in a moment.
The hon. Member for Walthamstow raised issues around financial services. A price reduction would probably not be appropriate under the circumstances she highlighted, but the damages route may be. That option remains open to consumers, which is made clear in clause 54. I hope that explains that point.

Andrew McDonald: What is the objection in principle to reciting in the Bill the position that the Minister describes on negligence and damages, which is that the consumer is entitled to be put back in the position they would have been in had the contract been performed correctly? Why is that so offensive that it cannot be put in the Bill? It is a statement of reality and fact.

Jennifer Willott: My understanding it that it is because much of this area of law has developed as a result of case law. It is extremely complicated. A lot of case law has built up over the years, which judges take into account when they are calculating how to determine the damages available to someone. There is not much support for codifying it, because the unintended consequences could be a problem. Any attempt to codify remedies gives rise to the risk of injustice.

Andrew McDonald: There is no injustice, because we are alluding to a right that already exists. An offended consumer has the ability to say to the trader, “You’ve let me down, you’re in breach and I’m now pursuing you to put me in the position that I should have been had the contract been performed correctly.” I am not sure how that has the potential for unintended consequences. It is a mere recital of the ability of the consumer to pursue his or her rights.

Jennifer Willott: But the right to claim damages is already laid out in the Bill. Clause 54 makes it clear that the statutory remedies
“do not prevent the consumer seeking other remedies…instead of or in addition to”
statutory remedies, and those other remedies are the common-law right to claim damages. The right is already in the Bill.

Andrew McDonald: You just don’t want to tell people what it is.

Jennifer Willott: Yes, basically the hon. Gentleman is correct, because the right is determined by the courts and so does not need to be written into the Bill. Citizens Advice, for example, said that it did not want to see the right codified by being put into the Bill. The right is there, and the Bill clearly states that people have the right to pursue damages. That is the important element; people need to know that they have that right.
The hon. Member for East Lothian mentioned issues related to telecoms and so on. It is most likely that sector-specific legislation would apply in the circumstance she mentioned. Ofcom has announced rules stating that installation appointments must be made within 12 days, and it will be the enforcer of those rules. In the circumstances the hon. Lady mentions, Ofcom would be responsible for ensuring that the rules were properly adhered to.
I hope I have answered the queries that hon. Members have raised and explained why we do not think the right approach is to calculate all the losses in the price reduction. Under some circumstances, damages would be the best route. I hope that has reassured hon. Members.

Stella Creasy: I thank the Minister for her answer. The challenge is the reverse of the challenge that she sets out: the danger of codifying something risks creating injustice, but not having such sector-specific legislation for financial services, for example, risks leaving consumers considerably out of pocket. They could lose not only the fees that they pay for a service but the income or protection that they were expecting from the service. I am thinking particularly of people who are badly advised on investments or mortgages. There is concern that they could be at risk. We recognise that the clause may not be the best place in the Bill to address that, so I am happy to withdraw the amendment, but I wanted to put our concerns on record. We cannot compare financial services with building services when it comes to redress, because of the different consequential impact.
We will come later to the point later about the role of ombudsmen services and the powers and ability that they have to determine what redress looks like for consumers. It is important that the Bill works with the legislation on alternative dispute resolution. If somebody is sold a bad investment product that has severe financial consequences for their family—if the investment advice has put them in a financially deleterious position—it seems a difficult proposition to ask them to seek damages as well. That is where the powers and certainty that ombudsmen would have in determining the price reduction and redress would come into play. We will want to explore these issues further when we come to our amendments on ombudsmen, because the Bill has to fit with the alternative dispute resolution legislation. It simply will not work without it, given some of the concerns that have been raised today. However, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Stella Creasy: I beg to move amendment 61, in clause56,page32,line36,at end insert—
‘(2A) The consumer is entitled to this refund within 30 days of agreeing that a refund is to be paid using the same payment method used in the original transfer.
(2B) Where the trader fails to ensure this refund is provided within this timeframe the consumer is entitled to seek damages from the trader commensurate with the impact of any loss caused by this delay unless the consumer has decided to waive this right to a refund within this timeframe.’.
Again, the amendment is about consistency. It is the now eerily familiar debate about the time deadlines for people to get their money back. The amendment simply makes that point again in relation to services, which I know Members feel strongly about. If we are going to introduce time limits for people to be able to return goods, or to expect deliveries, there should also be a natural expectation that they will get their money back within 30 days. That is why we have tabled the amendment.
I am sure that the Minister will say that we cannot always be sure that people will be able to secure their money back within 30 days. We disagree with that. It would be good if the Minister could at least guarantee that the implementation group is looking at how we can ensure that, when consumers exercise their right to a refund, they get a speedy remedy. The group should consider a 30-day period as good practice for when people should get their money back. That seems a fair proposition, and we have tabled the amendment on that basis. We would love the Minister to agree with us that 30 days is a reasonable amount of time within which to expect money back.

Fiona O'Donnell: I promise to make this a very short contribution. Will the Minister give an assurance that when it comes to regulated services—she mentioned telecoms by Ofcom and the energy market by Ofgem—that consumers’ rights are keeping pace with the Bill. Increasingly, I am getting complaints about energy suppliers when someone is paying an agreed monthly charge by direct debit and, at the end of the year, they end up significantly in credit. In the case of my constituent the sum was over £400, and the energy company is resisting refunding that money. She has paid for a service, but has not received the service. She wants a refund, but instead she has been told that she can have the credit on her account. Is the Minister satisfied that consumers are going to have equal rights across all services?

Jennifer Willott: As the hon. Member for Walthamstow said, the amendment sets a 30-day time limit for a trader to provide money back for a substandard service. Consumers are entitled to a reduction in price under the Bill—we have discussed that issue before in relation to goods and digital content, and it is important. The principles and arguments are the same in this case as for money-back provisions elsewhere in the Bill, so I will cover them only briefly, but people’s need to get their money back because something has not been performed properly is an important issue. They deserve to get their money back as soon as they can, and the Government support that.
In practice, a consumer is entitled to a reduction in price or a refund far quicker than 30 days. As soon as the right to a price reduction is exercised, they are entitled to get their money back, and any delay means that a trader is breaching their responsibilities under the Bill. We will make it clear in guidance that that obligation exists and that the onus is on the trader to take immediate action. We are concerned that setting new deadlines in the Bill would be likely to change the incentive, or at least reduce the emphasis and onus on traders, to act quickly. We need to ensure that there are no unintended consequences, especially because, as we have highlighted in debates on similar subjects, it is not clear how widespread the problem really is. Essentially, we believe that the potential disadvantages could outweigh the benefits that the change could bring.
As we have discussed before, it is clearly not the case that delayed refunds never happen. Anecdotal evidence shows that they do. However, we have seen a small number of cases in which businesses have deliberately avoided making payment, rather than just being tardy. I appreciate the argument that by regulating on the matter we would at least set a back-stop, to try to limit an area of law that unscrupulous traders might use to avoid refunds. I believe that unscrupulous traders would then just find another means to avoid making payment—for example, disputing that a consumer was due a refund at all.
As for the regulated services that the hon. Member for East Lothian highlighted, in clause 53 we make it clear how the regime for those services fits with the general regime. My officials are in regular contact with the regulators to discuss such issues. Rights and remedies should not be exactly the same in all cases, because clearly there are different circumstances, and consumers often have a different relationship with regulated services. We heard from the hon. Lady, for example, about the need for different regimes in financial services, telecoms and so on, so that we can treat those sectors specifically and take into account their individual circumstances. However, in some ways that links in with the Bill, and how the two regimes come together is laid out in clause 53.

Mary Glindon: Will the clause ensure that the consumer gets the refund by the same method by which they paid for the goods in the first place?

Jennifer Willott: We discussed that point while debating previous amendments on a similar matter. There are two different issues there. One is about issuing vouchers and so on, rather than paying back the money that somebody has paid. There is also the issue of how that money is transferred. As we discussed, under some EU directives that are transposed into British law, there are protections for consumers to be given money back rather than vouchers. As for defining that it has to be paid back by exactly the same method as the original payment, it is actually more helpful for consumers, as well as traders, to have more flexibility. For example, if a consumer paid by cheque, it is easier and more convenient for them to have cash back if they take something back to the shop, rather than be issued with another cheque. We need to retain the flexibility to take into account individual circumstances and security of payment.

Andrew McDonald: Would that problem not be best addressed by leaving the power to waive that right with the consumer, rather than through the trader retaining flexibility to choose how the money is repaid? For example, if somebody has paid by cheque, they should be able to negotiate to have cash back. If it were other way around and the trader could impose a different method of payment, that would be to the consumer’s detriment. Should that not be avoided?

Jennifer Willott: I am not aware that that is a particular problem, although the issue of some organisations issuing vouchers rather than cash has been raised, and that is covered by other areas of regulation. That problem has never been raised with me as a constituency MP, so I am not aware that there is a need to address it in the Bill.
It seems that the system generally works fine. If problems are highlighted, perhaps they should be dealt with in guidance. If consumer groups raise an issue, the implementation group will look at how the guidance is drafted and a broad range of issues, as we have discussed. Consumer groups such as the Citizens Advice, Which? and MoneySavingExpert.com are represented on the implementation group. They have a huge amount of information and intelligence about what consumers experience and what problems they are worried about. If there is a problem, I am sure they will be able to make sure that it is taken into account when the guidance is drawn up.

Andrew McDonald: I know we will come on to discuss estate agents but, in terms of moneys being returned, time is often of the essence. The time frames are surprising. People demand moneys from consumers through an immediate transfer, but when it comes to money coming the other way, consumers often wait a long time, and some traders have not got the point that consumers expect to have money returned with the same timeliness as it was demanded of them.

Jennifer Willott: We will make it clear in guidance that the obligation exists and that the onus is on the trader to take immediate action. The consumer becomes entitled to the reduction in price or refund as soon as the right to a price reduction is exercised. The guidance will make it clear that at that point the obligation is on the trader to take immediate action. I hope that that has answered hon. Members’ queries, and I hope that I have satisfied the points raised by the hon. Member for Walthamstow.

Stella Creasy: I think the Minister is aware that we disagree, as getting money back is a problem for some consumers. The example given by my hon. Friend the Member for East Lothian seems pertinent. People who are in credit on their energy bills and want to switch to another energy provider can find that they are several hundred pounds out of pocket if they are not able to secure that money quickly to cover any advance fees charged by a new provider. That is an example of where such problems might occur if it takes longer than 30 days to get money back.
I am not sure that we accept the logic of an argument that says that if we set a deadline for when people should expect their money, it will somehow encourage firms to delay giving money back, whereas if we do not set a deadline, they will pay money back quickly. We cannot have both sides of that equation.
I will be happy to withdraw the amendment, purely because we think such a measure will bear further scrutiny on Report or later in Committee, but we urge the Minister to look a little further into the issue because consumers are missing out. The Bill is an attempt to simplify legislation, rather than to clarify when people might expect their money back, but it would be a shame if this key area for some consumers, especially those on tight budgets, was missed as a result. We hope that the Minister will reflect on how she can accommodate some of our concerns, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 56 ordered to stand part of the Bill.

Clauses 57 to 60 ordered to stand part of the Bill.

Schedule 1  - Amendments consequential on Part 1

Jennifer Willott: I beg to move amendment 44,in schedule 1, page49,line30, at end insert—

‘Consequential repeal and revocation
55 In consequence of the amendments made by this Schedule—
(a) omit paragraph 5(9) of Schedule 2 to the Sale and Supply of Goods Act 1994, and
(b) omit paragraph 97 of Schedule 2 to the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277).’.

This amendment repeals or revokes provisions which are redundant because they amend provisions which are in turn repealed by Schedule 1 to the Bill.

David Amess: Order. I did not really want to draw the attention of members of the Committee to this, but notes have not worked. I have been made aware that the Speaker decided that refreshments other than water cannot be enjoyed during our Committee proceedings. If hon. Members disagree with that ruling, they must take it up with Mr Speaker. I have been put in an awkward position, but I repeat—it is Lent—that colleagues are allowed only water during our Committee proceedings.

Jennifer Willott: Thank you, Mr Amess. I am sure that members of the Committee who are in the same position as me apologise for any inconvenience caused.
Government amendment 44 is a technical amendment, and I hope that you will bear with me, Mr Amess, while I describe the detail. I am sure that Members are on the edge of their seats.
Schedule 1 to the Bill lists amendments that are consequential on part 1 of the Bill, one of which is to remove from the interpretation section of the Sale of Goods Act 1979 the definition of “consumer contract”, because once the Bill is in force, the 1979 Act will no longer have specific provisions relating to consumer contracts. Instead, they will be covered by the Bill, so the consumer-specific definitions are unnecessary. The 1979 Act will continue to apply to business-to-business or consumer-to-consumer contracts. The definition of “consumer contract” was itself introduced into the 1979 Act by paragraph 5(9) of schedule 2 to the Sale and Supply of Goods Act 1994. The first part of the amendment repeals that paragraph as it is redundant, given that the bit of law that it introduced is being repealed by the Bill.
The other provision in the amendment is in a similar vein. We have talked about the Consumer Protection from Unfair Trading Regulations 2008 numerous times. Those regulations amended other legislation, including the Sale and Supply of Goods to Consumers Regulations 2002, which paragraph 53 of schedule 1 to the Bill revokes. The amendment therefore tidies away another unnecessary piece of legislation on the statute books. I hope that all hon. Members will agree that the amendment, although dull—

Andrew McDonald: No, not at all.

Jennifer Willott: If the hon. Gentleman would like to comment on the amendment, I will be more than happy to give way. Otherwise, I commend the amendment, which is useful and necessary, to the Committee.

Stella Creasy: There are many things in life that we know to be both dull and necessary—we find many of those things in the House. We recognise why the Minister has tabled the amendment, which we see as a tidying amendment. We have no concerns about it and congratulate her on finding an enticing way to describe it.

Amendment 44 agreed to.

Schedule 1, as amended, agreed to.

Clause 61 ordered to stand part of the Bill.

Clause 62  - Requirement for contract terms and notices to be fair

Stella Creasy: I beg to move amendment 63, in clause62,page35,line32,at end insert—
‘(2A) For the purposes of this Act, consumer notices are considered to be any information or requirements about the contract conveyed to the consumer before or during the commissioning of the contract by the trader which may reasonably be considered designed to influence the behaviour of the consumer.’.
We now move to the part of the Bill dealing with unfair contract terms. Having just had a discussion about a fascinating tidying amendment, we will deal with a substantial number of amendments about the notion of whether a contract contains an unfair contract term and the Opposition’s suggestions for addressing that. Amendment 63 deals with where that would apply and where the information would appear— [Interruption.]I hope that hon. Members will bear with me. I am simply flagging up that the amendment is about defining where those terms might be found, so I will give the Committee a pre-emptive warning that we will come to what the specific terms might be. The question of where one might look for a term that would be considered unfair is what the amendment is about. I appreciate that there might be some confusion between clause 63 and amendment 63.
Amendment 63 is about defining what a consumer notice is, given that consumer notices are included under the auspices of where one might look for an unfair contract term. We have tabled it to probe the Government on what a consumer notice is, partly because we are a little concerned that there could be confusion for consumers. The Bill mentions “purported communication”. In fact, it specifies that
“an announcement, whether or not in writing, and any other communication or purported communication”
could be considered a consumer notice, and therefore relevant in determining what an unfair contract term might be.
Let me be clear that the Opposition are not worried about a broad definition of what information a consumer might be looking at when making a decision. However, it is important to have more clarification about the Government’s intent. In particular, does “purported communication” refer solely to the contract or service in question, or to more generalised statements from the service provider? Does it concern only direct communications with the consumer, or are more general marketing communications included? Is the conduct of the specific provider included? Eagle-eyed members of what I might graciously call the “Eggheads” team of ministerial support might have noticed that we have tabled an amendment on the question of the conduct of providers to try to understand whether their conduct might be considered “purported communication” and therefore be relevant when looking at unfair contract terms.
As we will see when we consider clause 63 and schedule 2, which contains a substantial list of unfair contract terms, if conduct and generalised communications were part of what could be considered when looking at unfair contract terms and unfair behaviour, it would give a consumer a substantial amount of material to draw on when arguing that a contract term was unfair. The Minister should therefore set out a little more clearly what the Government mean by “purported communication”. Does it include the conduct of an organisation? Are there any limits on the kinds of communication that could be considered relevant to a contract, or can it include generalised marketing as well as the specific marketing of a service? That clarification will help the Committee to understand where consumers might look for unfair contract terms, which we will deal with under clause 63.

Jennifer Willott: As the hon. Lady said, the amendment concerns the clause at the heart of the part of the Bill dealing with unfair terms. The regime to protect consumers from unfair terms is extremely complex and fragmented, and the Bill brings consumer contracts—whether negotiated or not—and consumer notices together into one regime for the first time. Clause 62 sets out the core requirement that contracts and notices must be fair.
We have based our explanation of what constitutes a notice on the current regime; to be specific, it is based on the Unfair Contract Terms Act 1977. Clause 61 makes it clear that a notice includes any announcement,
“whether or not in writing, and any other communication or purported communication.”
That covers any communication that is intended to be read by a consumer and applies if a notice relates to rights or obligations between a trader and a consumer, or excludes or restricts liability. The definition of a notice is therefore already broad, so the first half of the hon. Lady’s amendment is unnecessary, as it effectively duplicates clause 61(8). I hope that I can reassure the Committee that “notice” already has a broad definition, so there is more protection for consumers. In contrast with the current law, a transparency requirement applies to such notices for the first time.
The latter half of the amendment covers whether a consumer is influenced by a notice, which is a more subjective issue. However, the Government agree that consumers should be protected from information given by a trader—whether in a notice or not—that misleads or that distorts the consumer’s decisions. We can all imagine a situation in which a trader lures a consumer into making a purchase through misleading information. That is clearly not desirable, but I assure the Committee that legislation is already in place to protect consumers from that.

Andrew McDonald: That is extremely helpful. Will the Minister comment on contract terms that seek to exclude notices or other communications that are outwith the printed terms of the contract? It often happens in consumer affairs that the written terms and conditions specifically exclude any oral representations or other notices given. My interpretation is that, under the Bill, those communications would be brought into consideration, and that, of itself, an attempt to exclude such announcements would be unfair. Does she agree?

Jennifer Willott: We will probably come on to that in the next group of amendments. The issue is whether that would be considered part of the grey list and whether those terms could be assessed for fairness by the courts. The amendment is about the definition of a consumer notice and consumer contract, and therefore what forms of communication and paperwork are eligible for assessment of the fairness of the terms that they contain.

Andrew McDonald: So does the Minister have advertising claims in mind, when there are notices or communications that are completely at odds with the eventual contractual terms? If there is an inconsistency there, can the consumer say: “I relied on your representations made in an advertising notice about the qualities or expectations of these goods”?

Jennifer Willott: That brings us back to the issues we discussed in earlier parts of the Bill about the information that forms part of the contract, whether a consumer depends on the information that the trader provides about himself, the service or the goods that he provides to the consumer, and whether they are misleading. If a consumer takes a decision to purchase a particular service or good from a trader based on information that the trader provides about that service or good, it leads to a breach of contract if it is not fulfilled. I cannot remember which clause that is in, but the point is covered earlier in the Bill.
We are currently discussing which unfair terms in documents can be considered. As the Committee has already discussed, the Consumer Protection from Unfair Trading Regulations 2008 protect consumers from unfair, misleading and aggressive practices. As I have said, we have already published draft amendments to those regulations, to give consumers a new private right to enforce them. In addition, the Bill itself will ensure that relevant information that a consumer is given forms part of the contract. That goes to the point that the hon. Gentleman has just raised. For example, clause 50 covers services contracts and states that other information that the trader gives to the consumer forms part of the contract if the consumer took it into account when purchasing. We all agree that that protection is required. The intent behind the amendment is therefore already delivered through other reforms and other elements of the Bill.
The hon. Member for Walthamstow asked whether consumers were confused about the definition of a notice. The definition already exists. We have made it clearer and committed to providing guidance to help consumers and traders understand the law. The Law Commission looked at that issue and at the definitions. It consulted broadly and, as a result, recommended that we keep the definition that already exists, as it is generally understood. I hope that answers hon. Members’ questions and that the hon. Lady feels able to withdraw her amendment.

Stella Creasy: I thank the Minister for her answer. It is interesting that the provision will have a broad scope. If she will permit me, I will give a couple of examples to ensure that I have properly understood what she says. If a broadband trader advertises itself as offering the fastest broadband speed in the country, that would depend on the will of the trader alone, which is one of the unfair contract terms. If a consumer purchases one particular format of broadband based on that generalised term about its having the fastest speed and the trader then upgrades, but the consumer does not get the upgrade because he is paying for an old contract, can the consumer say, “It is an unfair contract term, because the consumer notice on which I have based this is that I will always have the fastest speed. I do not have to pay for an upgrade of this service. It would be unfair for me to expect anything else, because I have taken this notice into account”?
The other example on which I would be interested in clarification from the Minister, given what she said, is whether a communication can be understood by omission; by what a trader does not say. For example, if they do not communicate information about any changes in service or a good, or information that becomes pertinent we will come on to that in the debate on recalls—will that be covered? That could be defined as purported communication by default.
It would be helpful to define the scope of inferred communication. If a consumer had seen general adverts, would those apply specifically to their contract? Would a lack of communication also be considered to be a purported communication under such auspices? Would the trader’s behaviour in choosing not to say something be considered as a form of communication? I hope that the Minister understands the variance that I am referring to. By design, the trader has decided not to communicate that information, ergo that in itself is unfair. It would be helpful to clarify those points before we go any further.

Jennifer Willott: On the issue that the hon. Lady raised about omissions of information, the grey list makes clear that terms that the consumer has not had an opportunity to read are challengeable, so they would be covered. On broadband speeds and so on, if a consumer decided to sign up to a particular broadband provider because it claimed to offer a speed of, say, 20 megabits and they were not provided with that speed, that would be covered because the provider would not be complying with the terms of the contract and the reason why the consumer had signed up to that. If the consumer had signed up on the grounds that the trader provided certain speeds, then a higher speed became available but the consumer was still being provided with the same service, that would probably depend on the circumstances. Generally it would not be considered fair for them to get the upgraded service without paying extra, as they would still be getting what they agreed to pay for, but it would depend on the terms of the contract.
If the service was laid out in the contract and the consumer was still getting that service, that would be one set of circumstances. If the provider then offered much faster speeds to new customers and, as a result, the speeds dropped off significantly for those with older contracts, that would be a different situation.

Stella Creasy: Just to clarify, what if a consumer had signed up not for a specific service speed but the notion of a speedy service? The point I am trying to make with this example is the difference between specific communication about a particular contract that a consumer might sign up to and generalised communication about the quality of the service that a provider might offer. I want to understand whether consumer notices include that generalised communication.
A generalised communication might say, “We are the fastest broadband provider in the country” and the specific communication might say, “You have signed up to this contract for 20 megabits.” If the consumer has signed up based on the generalised communication—because that provider tells them that it is the fastest in the country—will they be able to draw on that as a purported communication, or does the clause refer only to communication about a specific contract at the time of purchase? It would be helpful to clarify that distinction, because I read the clause as saying that I can draw on the generalised communication.

Jennifer Willott: A consumer cannot take general hyperbole as fact. For example, they might read that “Red Bull gives you wings”, but if they then do not sprout wings, they cannot take that as a breach of contract. [ Interruption.] Other energy drinks are also available. It would not reasonable to consider statements such as that or “You will always have the best broadband.” However, if the consumer has been misled, the regulations on unfair terms in consumer contracts will still apply; it depends on the exact circumstances of the case. I hope that that answers the hon. Lady’s point.

Stella Creasy: I thank the Minister for her answer. We were concerned about the distinction between specific and generalised communication, but I am happy to withdraw the amendment. Our concern is that consumers should know which information they should take into account in assessing unfair contract terms, and some feedback on that would be helpful. It is another issue to add to the growing list for the implementation group. “Purported” is one of those words, like “reasonable”, that are in the eye of the beholder. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 62 ordered to stand part of the Bill.

Clause 63  - Contract terms which may or must be regarded as unfair

Stella Creasy: I beg to move amendment 70, in clause63,page36,line25,at end insert—
‘(1A) Where a contract includes a term which is included in either Part 1 or Part 2 of Schedule 2 of this Act, the trader must draw to the attention of the consumer these terms and their rights to challenge these under this legislation prior to purchase.’.

David Amess: With this it will be convenient to discuss the following:
Clause stand part.
Amendment 99,page50,line11, in schedule 2, after ‘realisation’, insert ‘or management or delivery’.
Amendment 66,page51,line10, in schedule 2, at end insert—
‘(14A) A term (including those within the scope of paragraph 22 of this Schedule) which has the object or effect of permitting a trader to increase the price of, or alter unilaterally any characteristics of goods, digital content or services during any minimum contract period or before the end of a contract of a specified duration without a valid reason or where it is reasonably foreseeable that the consumer would not be free to dissolve the contract without being disadvantaged.’.
Amendment 64,page51,line37, in schedule 2, at end insert—
‘(21) A term which requires a consumer to pay a charge for or be liable for an element of a good or service that another party has also been charged for in the course of the same transaction.’.
Amendment 65,page51,line37, in schedule 2, at end insert—
‘(22) A term which seeks to restrict the ability of a consumer to access information to enable them to ascertain whether the contract they are being offered could undermine their statutory rights.’.
Amendment 67,page51,line37, in schedule 2, at end insert—
‘(23) A term which has the object or effect of enabling a trader to increase the price of the contract unilaterally without a valid reason and where the consumer is unable to—
(a) enter into a new regulated mortgage contract or home purchase plan or vary the terms of an existing regulated mortgage contract or home purchase plan with the existing mortgage lender or home purchase provider; or
(b) enter into a new regulated mortgage contract or home purchase plan with a new mortgage lender or home purchase provider.
The terms “regulated mortgage contract” and ‘home purchase plan’ have the same meaning as in the Financial Services and Market Act 2000 (Regulated Activities) Order 2001 as amended.’.
Amendment 68,page51,line37, in schedule 2, at end insert—
‘(24) If the contract is for a financial service, a term that directly causes financial detriment to the consumer such that it can be seen to reasonably alter the capacity of the consumer to pay the costs of the contract.’.
Amendment 69,page51,line37, in schedule 2, at end insert—
‘(25) Where the service provided is for an additional assistance service as set out in section 51, a term providing for charges unless the original provider of the service has approved this service and range of costs for its provision within which this charge is included.’.
Amendment 100,page52,line17, in schedule 2, at end insert—
‘23A Whether a consumer is able to dissolve a contract, in the case of contracts provided by any Government department or local or public authority, shall be decided by whether a reasonable person would consider that dissolving the contract should be possible.’.
Schedule 2 stand part.

Stella Creasy: I know a number of Members can hardly contain their excitement. We come to the behemoth of amendments. I will try to talk the Committee through the individual amendments as quickly as possible.
Amendment 70 sets out our concern to make sure that when any unfair contract terms are used in a contract—whether including those in our amendments or not—consumers should be told about them. Unfair contract terms are not always unfair, but it is right that there is some legal redress to challenge them, because they could well be unfair. What do we mean by unfair? Unfair terms would cause detriment to a consumer. Inclusion on the grey list is about saying that, in some circumstances, these types of conditions or restrictions on sales would be unfair to consumers and that it is right that we should challenge them because that is what good consumer protection does.

Robert Flello: Also, if the contract is subsequently amended and one of the amending terms is on the grey list, that should also be drawn to attention.

Stella Creasy: My hon. Friend is right. We know the benefits of clarifying and simplifying unfair contract terms, because we understand that the consequence of having them is about £1.7 million worth of detriment to consumers every single year. We also know that it will save money for businesses in terms of having contracts that are clearer and therefore less open to challenge. Some of the vexatious challenges—the word that the hon. Member for Spelthorne is so keen on again—will, I hope, be minimised by having a clear list of grey terms.
We welcome the principle behind this. Our amendments try to suggest some other terms and behaviour that we think come up frequently enough in contracts that it is right to give the same protection of legal challenge. These are terms of which both consumers and businesses should be aware. Whatever the challenge, we think it is important that consumers are aware. We had the discussion on Tuesday about information and the importance of consumers being empowered so that they can make good choices. If you are offered a contract with one of these terms, it is right that it should be drawn to your attention prior to purchase, given that it is set out in law. That does not mean that you might not continue to go ahead with a contract. You might have other reasons to do so, but you would be an informed consumer. Amendment 70 is about terms and conditions—the small print; the wording that all of us might look at and sigh. It is always worth while knowing that a contract might contain something disadvantageous.

Robert Flello: In previous discussions we touched on the wonderful little box at the bottom that says, “Tick to say you have read the terms and conditions.” That becomes even more important if some of the terms and conditions are on the grey list.

Stella Creasy: My hon. Friend is making more work for the implementation group, and rightly so. He is absolutely right. “Buyer beware” is one of those phrases that gets bandied about, but beware of what? That is what we are trying to get at in this amendment.
I turn to the list of unfair activities. We recognise that the grey list is admirable, but we think that there are one or two omissions. I was very pleased to hear the Minister say this morning that the issue raised by Amendment 64 is unfair on consumers and needs to be tackled. The issue is what we are calling double charging: the practice we are seeing worrying evidence of in the estate agent industry—and in the pension brokerage industry—whereby two parties are charged for the same transaction for the same service. That seems to present an immediate conflict of interest as to in whose interest the service provider is acting.
I feel strongly about double charging, especially when it comes to estate agents, because I can see first hand the impact it is having on the property market in my local community, Walthamstow, in London. I hope that, given how positive she was about the idea that there is a problem that must be tackled, the Minister will agree to the amendment, because I fear that if it is rejected we could see a huge detriment to the English and Welsh housing market. Once estate agents have spotted a good way of making a fast buck, the idea that others will not follow does not reflect what we have seen in the past.
Let me explain to the hon. Member for Wycombe what is happening, as in his community he might not yet have seen what is happening elsewhere.

Steven Baker: I object to the notion that I might not have seen what is happening in my community. As it happens, a solicitor came to see me only last Friday about just this issue.

Stella Creasy: It gives me no pleasure, but in a way I am glad to hear that. I had been concerned that, a bit like with payday lending, we were starting to see the problem in London where the pressures on the cost of living are particularly acute, and that we would then see it spread out across the country. It gives me no pleasure that it has already spread to the hon. Gentleman’s constituency, but it proves the point that we are not talking about one or two rogue agencies in London taking advantage of an overheated property market—it is a practice that is going to spread. I am grateful for the hon. Gentleman’s correction.
For the benefit of other Members who might not yet have seen the practice—including Members from Scotland, who, given what I have heard about the Scottish property market’s different structure of protection for consumers, might not be aware of what we are seeing—estate agents are selling properties through sale by tender. They charge the seller a fee, often smaller than one might expect for an estate agent’s service, but include in the provisions of the contract for the sale by tender a requirement for the buyer to pay a fee, usually of 2% to 2.5% of the price of the property—I do not know whether it is higher in Wycombe.
That is a substantial change in estate agents’ behaviour. The traditional format is that the seller pays commission to the estate agent for having marketed the property. Such a change means that people who are buying properties are having to factor in the fee on top of their offer. Automatically, the seller is going to get less money because factoring in a fee of 2% to 2.5% means adding £10,000, sometimes £15,000, on to the price of a property in the London market. That is a substantial figure. I do not know whether the hon. Member for Wycombe has seen the same house-price inflation that we in London have seen in the past couple of months, but the sums are huge.
The practice clearly cuts out a section of buyers for properties, which further restricts the rights of the seller by limiting whom they can sell to. The contracts also feature a clause restricting the ability of the seller to speak to the buyer and therefore to know what price might be offered in a sealed bid situation. The only person who knows the true price of the property is the estate agent, who takes the fee. The agent in Walthamstow, Douglas Allen—or Arran Estate Agents, as it is now operating—tells me that, miraculously, it achieves 102.5% of the price of the property, so the fee does not affect the price people are getting. Obviously, if the agents set the price, they can set the terms of the contract.
The practice seems deeply unfair. I have spoken to a number of people locally who have been affected by it, and the fact that other estate agents in other parts of the south-east are doing it is a worrying trend. The property ombudsman calls it a “worrying emerging commercial practice”, but is not sure about the legal position of charging fees to buyers, given the inevitable conflicts of interest—in whose interest are agents acting?
Estate agents themselves openly admit that they expect buyers to factor the fee into the price, therefore openly accepting that they are acting in conflict with the interests of the seller. Yet there is nothing that stops them doing that. The amendment would. It would make such a contract term legally challengeable and allow the property ombudsman to address such practices, by saying that charging two different parties on the same transaction could be unfair.
That is why I have tabled the amendment. Given that the Minister has said that she did not believe that the practice was appropriate, I hope that she will support our proposal. It is something that we feel strongly about, especially in view of our other concerns about the regulation of estate agents. The grey list will refer to a number of practices in the housing market, and we are deeply concerned about asking, say, Powys county council trading standards to be responsible for looking at all of that, because such practices are growing like wildfire around the country.
The Minister says that she retains full confidence in the ability of Powys county council to deal with the 500,000 estate agents in the UK. However, such practices are spreading and the law is not clear about whether they are illegal or merely immoral—some feel that with estate agents, morality does not always come into it—so we should give consumers the protection that the amendment to the grey list would offer.
Amendment 65 follows on from that. The contracts restrict consumers’ ability to find out information about the prices that they might be offered, because they prohibit buyers from speaking to sellers. Buyers and sellers cannot set out what they would pay for a property and thus what would constitute a fair price. The Bill gives consumers the clear protection that they should pay a fair price, and we believe that a contract term that restricts a consumer’s ability to find out whether they are paying a fair price for a property or service is unfair. The list should be amended to allow legal scrutiny of whether such a restriction is fair on consumers.
Amendment 66 speaks to a debate that we had on Tuesday about variations in a contract. I am thinking, in particular, of Bank of Ireland mortgage holders who discovered that their contracts had been varied but they were still locked into them. The amendment is designed simply to give consumers the right to challenge any variation that is forced on them as an unfair contract term.

Robert Flello: This is of particular interest, because one of the things that came up in today’s Business, Innovation and Skills questions was lenders who tell someone who wants to remortgage or take out a new mortgage, “You cannot do that, because we want to lend only to brand new borrowers.” Someone who faces being trapped and having their conditions changed cannot even go out to the rest of the market and find a better deal, because the market is so manipulated by lenders that nobody else will lend to them. They are wrapped into a horrendous situation, where they have no choice but to accept a term that locks them in because they cannot go anywhere else.

Stella Creasy: I completely agree with my hon. Friend, and amendment 67 is about such mortgage prisoners. I know that that is something that he wants to talk about. Amendments 66 and 67 have been suggested by the Financial Conduct Authority’s consumer panel, which recognises that it is no good telling people to look for an alternative contract if they would incur a large financial penalty in doing so or if they would be unable to find an appropriate equivalent, in the case of mortgages or advice. The amendments are designed to ensure that consumers could seek legal address. Such contract terms might not always be deemed unfair, but people should be able to challenge that in court.
Amendment 68 is about financial services. As hon. Members know, I am particularly concerned and vexed about financial services, because of their potential consequences for people. [Interruption.] I say to the hon. Member for Spelthorne that I cannot help it; I see him and I am vexed, so I keep using that word. The amendment particularly concerns contracts that create debt for a consumer and are sold in such a way as to perpetuate debt. I am pleased that the Government have accepted the Opposition’s argument that the payday lending industry has perpetuated debt in the way in which has lent to people. By pushing people into debt, it has made them more likely to need its products again and again.
We believe that it is unfair to sell a product that appears superficially to be about helping people financially, when the contract is designed to push them into debt so that they will buy the company’s products repeatedly. For one payday lending company, 24% of its profits came from 34,000 customers who had to borrow month after month. People could not make ends meet because they had got stuck in a spiral, because the terms of the contract—the high rates of interest—pushed them into debt every time. That sort of practice and behaviour is not confined to payday lending. It can also be seen with debt management companies. I pay tribute to the work of campaigner Lee Sherriff in Carlisle, who has been a diligent advocate when addressing the provisions in debt management contracts. When someone goes to a service to deal with debt, some companies apply charges that by their nature perpetuate the debt. Making that an unfair contract term would not mean that all debt management contracts had those problems, but it would allow legal challenge of some proposals.
I know that my hon. Friend the Member for North Tyneside feels strongly about this subject because she has seen people in this position. I will give the Committee an example of the charges we have seen. Clear View Finance debt management had a clause in the contract that allowed the company to recover 90% of the contract’s cost for its legal fees. No sensible person could have looked at that contract and thought that that would lead to anything other than further debt for someone who was already in debt and had gone to a debt management company. It is a manifestly unfair situation and it would be right to enable organisations to deal with that. People in this position tend to end up at Citizens Advice and we know that that organisation is sympathetic to the need to reform debt management companies, as well as deal with the original causes of debt. I will leave my hon. Friend the Member for North Tyneside to say more about that and the consequences.
Amendment 69 is on copycat websites, a subject we have also discussed previously, in particular those that masquerade as official Government websites. The Government have said that they are dealing with the issue. However, when somebody has been mis-sold a service because they believe they are using an official site, that should in itself be considered an example of unfair behaviour and be open to legal challenge. As we heard from my hon. Friend the Member for East Lothian, she and I have had very different experiences in challenging these websites, their fees and the claim of mis-selling for our constituents. My constituent’s bank agreed to take back the money whereas my hon. Friend’s constituent’s bank did not allow her to refund the money that she had paid to the same website, taxreturngateway.com. I am not advertising it; I am trying to warn people about it. The idea of making that an unfair contract term is another way to give better legal protection.
Amendment 99 is about the way in which the schedule sets out that if something is dependent “on the trader’s will alone” that might be an unfair contract term. The Bill refers to public services with the provisions in clause 2 about the particular businesses covered. We are interested to know where this proposal would come into play in the delivery of public services, such as social care, child care vouchers or the provision of tuition fees. We welcome the Government’s views on how they see the concept of the management or delivery entirely in the service provider’s hands. How would the unfair contract term about delivery apply in those circumstances? There might not be alternative services or the change in services might cause problems for consumers.
Amendment 100—I promise we are near the end—is about the same issue: contracts that last indefinitely. The legislation says that it is unfair if a contract lasts indefinitely for a consumer. We want to understand where that would apply in the public sector. For example, for a social housing tenant or somebody who is procuring a care budget, the legislation says that unfair contract terms would not apply if the contract can be dissolved. We want to understand better what concept of dissolution the Government have when it comes to services provided by the public sector.
For example, if someone has ongoing specialist care needs and might directly purchase them through a personal care budget, they could not be expected to wind them up in order to seek an alternative contract. Would they ever be able to dissolve that contract without substantial detriment to themselves? Given that the Government have set out that the Bill will cover businesses within local government, national Government or the public sector, a better definition is needed of what it means to dissolve a service, because there are so many services for which dissolution would not be practical. The contrast between that situation and choosing an alternative broadband provider or builder is stark. The amendment is tabled to try to understand that.
I hope that I have briefly explained the omissions from the grey list that our amendments reflect. I look forward to the Minister’s comments, because there are substantial points to consider about how unfair contract terms can be interpreted. I end by repeating that we are not suggesting that all the circumstances in question are unfair, but given that the Bill sets up the legal process for judging that, it would be an omission not to include provision for challenge by consumers on a number of matters, because of the evidence of detriment that occurs to them in certain circumstances. If the Minister believes that the issue is covered in alternative areas of the Bill or other legislation, we would be interested to hear about them as well.

Mary Glindon: I want to give an example of a situation such as my hon. Friend referred to, at an organisation that is fairly new in north Tyneside. It is an advice organisation that came to my attention when some of the people using the service had to be referred to the caseworker in my office to finish off their cases and get them their money from the jobcentre. My caseworker has met one of the people who run the organisation, and what concerns me is that it helps people to get money that is owed to them in the form of benefits. It claims to be a not-for-profit organisation, yet obviously it has staff who need to be paid.
I have had a glimpse of one of the organisation’s adverts. It says that it will give people advice and help them with tribunals and getting owed benefits. At the bottom it says in small writing that for every lump sum gained—and we must remember when they say lump sum, they mean arrears of benefit—it will take 15p in the pound. That is benefit money, paid by the taxpayer into the Treasury and then disseminated to Departments.
Although the organisation claims that it is a not-for-profit organisation, it is performing a service that could be performed by citizens advice bureaux, or indeed by MPs in our own offices, as in the case I described of a gentleman who was owed money. He got £3,000, £500 of which had to be paid to the advice service. In the end it was my caseworker who hastened the case and got things sorted. He is now sorry that he went to this advice service, and he advises anybody he meets not to do so and to use free advice services instead.
Having looked into the matter, I am not sure how far what that advice service does is legal, but it seems to me that it could be a grey area that should be on the grey list. I do not want people to lose benefits, which they might need to pay rent, for example, because in the end benefits are meant to cover the basic costs of living. It is not money that is over and above what helps someone to live. Losing 15% of back benefit is a serious situation to put people in, and could throws them into more need. Although the service employs people, I find it troubling. Is there anything that we can do in the Bill to limit the starting up of such service, and to find out whether they operate properly for vulnerable residents in north Tyneside?

Steven Baker: When I read this schedule and consider the Opposition’s amendments, I am very much reminded of how degenerate some businessmen are. In business myself, I always found that the best approach was to leave one’s customers delighted, get referrals and go on successfully. I am amazed by the sheer scale of the ways that business people find to fail their customers and leave them dissatisfied. It is quite remarkable.
It puts me in mind of Hebrews, chapter 7, verses 18-19:
“The former regulation is set aside because it was weak and useless (for the law made nothing perfect), and a better hope is introduced, by which we draw near to God.”
I wonder whether the amendments are a better hope by which we might draw near to, in this case, the perfect contract.
The whole Committee should join me in complimenting the hon. Member for Walthamstow on the quality of the work she has so obviously put into these and other amendments. I have not read Habermas, but I am glad she recommended him to me. If I have understood correctly, it seems from her earlier remarks that the philosophy of Habermas is evident in the notion that people must be fully informed in order to make a properly empowered decision when they enter into a contract. I am considering buying a new motorcycle, and I had not really thought about whether I needed to be fully empowered with all this additional information before doing so: I thought I would ride a selection and buy the one that suited me best. However, thanks to her, I have realised the sheer scale of the risks I will be taking in entering into such a contract.
There is a sense of futility in trying to bring so much information to people’s attention in advance. We were warned by your co-Chair, Mr Amess, not to divert too far into philosophy, so I hope the hon. Lady will not be too disappointed if I restrict my remarks to the issue before us, not least because I am perhaps far less well equipped than she is to consider such matters. However, there is a grave danger that we could overwhelm consumers by trying to nail down in advance everything that might conceivably go wrong.
On looking at any one of the unfair terms listed in schedule 2, it is clear that there must be a long history of related case law, and it is difficult to foresee how a degenerate business person might have failed a customer in such a way. Let us consider paragraph 3 of schedule 2:
“A term which has the object or effect of making an agreement binding on the consumer in a case where the provision of services by the trader is subject to a condition whose realisation depends on the trader’s will alone.”
I confess that I will be taking on trust the Government’s insistence that this is a necessary provision, because I cannot conceive what might have been done to make it necessary. Perhaps the Minister will give a couple of examples that explain such a term, although I hope she will not go through each and every term in the list; otherwise, we might be here for some time—perhaps in time to see realised this better hope by which we draw near to God. However, if she could deal with that example, I would be extremely grateful.
The hon. Member for Walthamstow made a very good point about estate agents and double charging. However, I want to raise with the Minister the opposite point. A solicitor who came to see me observed that when solicitors act for both the mortgage lender and the borrower, it might be in everybody’s interests that they perform that service once for both sides of the contract. That seems an odd situation—one would expect to have two independent solicitors verifying the terms on behalf of each party—but in a sense, the mortgage lender’s and the borrower’s interests are closely aligned. It might well be that double charging by solicitors, in the case of mortgage conveyancing, is a place where efficiencies can be realised. It might actually be quite a good thing. I make no judgment—I just observe that the solicitor’s argument was that it could be a good thing that is in everybody’s interests.
If I have understood correctly, the hon. Member for Walthamstow has tabled amendments that, if accepted, would simply tell the consumer what is going on, which seems a very good thing. I would not want us to restrict traders’ ability to double charge in circumstances where it might be appropriate and in everybody’s interests to make those efficiencies. Have the Government considered that point?

Stella Creasy: I promise not to discuss with my hon. Friend his communicative acts. The amendments relate to additions to the schedule of unfair contract terms, so it would be open to the scrutiny he is suggesting. As has been noted, there are indeed cases where one might want to split the fee for the same transaction. However, where the estate agent is charging a commission fee to both the buyer and the seller, and putting those two actors together, that is unfair. The amendment would enable that to be challenged. I have constituents who are trying to resist paying that fee, both for the seller and buyer, because they feel it is unfair. There is no clarity for them about how they can challenge the idea that they should both pay for the same transaction. That is different example from a payment made in the course of a sale, when somebody might pay for conveyancing and for the services of a solicitor. Those are two different types of service. I hope that clarifies the context in which we think there should be an avenue for legal challenge and why we want it in the list, so that a judge to decide what is right.

Steven Baker: I am flattered to be described as the hon. Lady’s hon. Friend. I am not sure whether she is crossing to this side of the room or I am crossing to hers. Am I required to become more collectivist, or is she required to become more committed to private property rights? I am not sure, but she did describe herself earlier as a left libertarian. I have often thought of myself as on the free-market left, so perhaps there is more common ground.
The more serious point is that I am glad that the hon. Lady has explained that she wants to make provisions to enable challenge. I think that is a sensible point. However, I feel ill equipped—this is the point I made earlier to the Minister—when I look at any number of the unfair terms in question and see that they require so much expertise to understand what might previously have gone wrong. I feel slightly ill equipped to know whether the scope of the amendments tabled by the hon. Member for Walthamstow is appropriate and whether they are necessary. She clearly feels that they are, but I am interested to know from the Government’s point of view, with all the expertise available to them, whether that is the case.
The hon. Lady made an interesting point about bringing public services into scope. I will make two points. The first is a broad one: there is a certain cruelty in making promises that cannot be kept. We are still living beyond our means to the tune of about £100 billion a year, as you know, Mr Amess. I worry that the state, in drawing people into public services, takes the most vulnerable people in our society and gives them the hope that everybody else will be satisfactorily and effectively compelled to pay for services for them, and then it turns out that it is not possible to sustain that. In considering what is fair in public services, we might look at the sustainability of public finances and the quality of the pledges that we as politicians make to our electorate. Perhaps that point is a little broad.
The other point is on tax credits. As Members of Parliament, we have all had people come to see us at the end of their tether about the need to refund tax credits to HMRC. Large sums of money have had to be refunded. If we were to extend the Bill to public services in the round, we might well find that quite a degree of good would come of it if the state was forced to behave as a trader would behave and contract with the public in a way that could be enforced. However, I am also rather reluctant to suggest that the state should become more like a business, because businesses are founded on social co-operation whereas the state is founded on coercion. Perhaps that is too philosophical.
I am grateful to the hon. Lady for explaining that the amendment is about making provisions to enable certain terms to be challenged. However, the complexity of the terms that have been put before us leaves a humble aerospace and software engineer such as myself, who has always aspired to do good business and not bad, finding it difficult to understand the sheer scale and scope of such degenerate conduct. I hope that the Government have got the list right.

Robert Flello: I am pleased to follow the hon. Member for Wycombe. I am not sure if he was having a go at his coalition colleagues about pledges that were not kept, but we will leave that hanging.
The hon. Gentleman was conflating double charging and splitting charging. The point is about saying that splitting charges is fine, but double charging—charging twice or more for the same thing—is not fine. I like his description of “degenerate” businesses. Sadly, there are far too many businesses that leave morality at the door in the pursuit of the holy pound, or the unholy pound. The problem is that we have a culture in which, if there is a way for a business to add an extra charge somewhere, or find a way to put a few more quid on to something—I tend to refer to that, in a deliberately derogatory way, as the “Ryanair factor”, perhaps because I have no time for that particular carrier at all—sadly, far too many businesses will jump at the chance. The amendments are incredibly important in order to restrict the ability of businesses to act immorally; sadly, far too many of them do so.

Steven Baker: On the point about conflating double charging and splitting, if someone is providing a service at a cost, and they wish to make 5% over that cost, how does that work? Do they charge 5% to both customers, or 2.5% to each? I think the truth is that they will charge the amount that people will pay for each transaction. I do not want to return to the conversation we had earlier about what a just price is, but if people are prepared to pay 3% each on top of their costs, it is probably a just price for both parties. I do not think it is a mistake to conflate the two.

Robert Flello: The hon. Gentleman will not be surprised to know that I fundamentally disagree with him. The situation we are describing is where the buyer and the seller do not really have a choice and are being forced to pay whatever they are being forced to pay.

Andrew McDonald: Is the situation not mercifully simple? We are talking about a property transaction, where a solicitor is acting for a purchaser and mortgagor. They have unity of purpose, and the building society, as was—the bank now—will approve that lawyer to act for it only if it is confident that they will do that job. The ultimate payer is paying the single fee. In the situation that is being described to us, we have estate agents potentially double charging when they have a direct conflict of interest. They cannot have two clients when they are negotiating the sale of a property. It is wholly and distinctly different from the situation of a conveyancing lawyer acting for a buyer and a building society.

Robert Flello: My hon. Friend makes almost the exact point that I was going to make. That is a better comparison. If there is a solicitor whose charges are, let us say for the sake of fantasy, £100, and they try to charge both parties £100, that is clearly wrong. That is exactly what the amendments are designed to address.
How can locking someone into a financial product, whether a mortgage or any other product, that they cannot get out of without ridiculous penalties, or indeed at all, be morally right? How can we stand here in the 21st century and allow someone to be bonded to a contract that they can never get out of, or one that will be so costly to get out of that effectively they cannot get out of it?
I have been pondering that matter and comparing it with the situation when I took out my mortgage. It was a fixed-rate mortgage, and I knew that there would be penalties if I came out of it for the first five years. That was clear and up-front. I knew what the penalties were, and I had calculated what the cost to me would be if interest rates moved against me. That is a world of difference from a situation where someone enters a contract or mortgage and is never able to choose to move. As I said in an earlier intervention, if I was then looking to move my mortgage somewhere else and found that lenders were interested only in new mortgagors and were not prepared to take me on as a re-mortgagor, that would put me in an even more difficult position in trying to avoid contracts that are, frankly, immoral.
A related issue that is covered by the amendments is online insurance brokers. A family member of mine recently had some experience with them; I think the online broker was called One Call. They went through the process of picking the best quote, or the quote they thought provided the best value for money, and picked a particular policy. It was a good-value quote; it was not the cheapest, but it seemed to cover everything they wanted.
Some months later, the family member changed cars and went back to the broker to see what the situation was for insuring the new car, only to find that a great raft of charges would apply. There were charges for changing the policy and even for considering a change in the policy. Therefore, they decided to go with another insurer, only to discover that although they could do that, not only was there going to be a large deduction from the refund due on the insurance premiums from One Call, but they would have to wait two months to get their money back. Those hidden charges are tucked away, and only if they had gone trawling through all the small print would they have been able to make a decision about whether that was the right choice.
Those are the unscrupulous, immoral things that businesses are doing. They are finding ways to squeeze a few quid out of customers who want to go elsewhere because they cannot get policies that suit their needs. To hang on to that money is immoral, and the amendments would address such matters. I do not know whether my hon. Friend the Member for Walthamstow wishes to press them, but if she does I will support them. If we hear reassurance from the Minister that either the amendments will be adopted or the Government will bring forward their own amendments, that may change the picture somewhat, but things need to be done. Businesses across the piece are ripping people off, and that has got to stop. That will happen only if the Bill is amended to make it stop.

Ordered, That the debate be now adjourned.—(Mr Gyimah.)

Adjourned till this day at Two o’clock.